United States: Beltway Report

If you are asking yourself "What is a ‘Red Flag’ and "Do I salute if I see one?" take comfort. You are not alone. The federal regulatory agencies, pursuant to the FACT Act, have issued proposed rulemaking regulations regarding "Red Flag" guidelines and the Address Discrepancy Rules. The agencies have requested comment on rules that would require a financial institution or creditor to establish a written, risk-based ID theft program. The program would be required to take into account specified "Red Flags" such as the patterns, practices, and specific forms of activity that could suggest identity theft. In addition, the agencies proposed rules that would require issuers or users of consumer reports to validate address changes and deal with address discrepancies.

The federal banking agencies, FTC, and NCUA have issued an advance notice of proposed rulemaking asking for comments on developing the furnisher guidelines and regulations required by the FCRA. The FCRA requires guidelines and regulations for furnishers regarding the accuracy and integrity of information that they furnish to CRAs as well as regulations that identify when a furnisher is required to reinvestigate a consumer dispute concerning the accuracy of information contained in a consumer report.

The agencies asked for comment on numerous issues, including, for example, the types of errors that may impair the accuracy and integrity of information furnished to CRAs and when a furnisher should be required to investigate a dispute.

In the name of simplification, the agencies issued a report concerning the results of testing alternatives to GLBA privacy notices. The consumer research started in 2003 after comment on a new approach to GLBA privacy notices that involves a "layered" notice. Focus group and interview research was conducted testing consumers’ reaction to sample privacy notices. The consultants then designed a "prototype" privacy notice that presents information in a tabular format. The agencies indicated that they plan to do further testing and will likely issue proposed changes to the privacy rules … after still more testing.

The FRB issued an interim final rule under Regulation E (Electronic Fund Transfers) in connection with payroll cards that provides financial institutions with an alternative to providing periodic statement information to consumers. Specifically, in lieu of mailing a traditional periodic statement, an institution may: (1) make balance information available through a telephone; (2) make an electronic history of the consumer’s transactions available through the Internet for at least 60 days from the date the consumer electronically accesses the account; and (3) promptly provide, upon request, a written history of the consumer’s transactions that covers at least 60 days preceding the date of the consumer’s request.

The FRB’s decision to depart from the traditional periodic statement model may suggest that the FRB is willing to consider greater flexibility in meeting statutory requirements for providing periodic statements and potentially other information electronically.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved